Competition v Influence: Brandeis v Obama

Chidem Kurdas

We are witnessing the anti-competitive effects of the Obama administration’s two giant regulatory acts. Under Obamacare, medical providers and health insurers are consolidating—thus the recent announcement that Humana and Aetna will merge. Under Dodd-Frank, small financial firms struggle desperately to survive while big banks have immunity from failure.

The other side of the regulatory coin is that the economy is increasingly run by political fiat. Whoever has political influence gets the goodies while the rest pay. Big entities spend more money, hire more lobbyists and have more influence. The feedback loop goes from regulation to lobbying to destruction of competitive markets to periodic crises, which leads to more regulation, etc.

This is a long-term trend that has now metastasized. It began in the early 20th century:

“It is a sad irony that the great Louis Brandeis, like other inspirers of centralized utopias, helped set up the conditions that in effect destroy what he wanted to preserve. He regarded free competition as valuable and wanted to protect it. That was the reasoning behind his rejection (as Supreme Court Justice) of Roosevelt’s National Recovery Act. Yet the regulatory state that owes its beginnings to him favors politically influential large entities, whether unions or trade associations. It discriminates against small businesses and consumers, destroying competition.

Interventionists twist this argument around to fault business interests for lobbying. Thus President Barack Obama suggested businesses cause the negative-sum game —even as, like most politicians, Obama takes money from business interests. He even received a donation from “financier” Allen Stanford and posed with the thug for a photograph, both of them smiling widely. You may say that’s the way of the world, a politician can’t avoid special interest contributions if he or she wants to win elections.

But the same argument can be made for business people— they can’t avoid paying for political protection in an economy ruled by political influence, which is what the regulatory state is. It is the political class that is creating a system in which the obvious way to get ahead and do well in business is to acquire political influence. And it is the political class – broadly defined to include regulators, lawyers, lobbyists, advisers – that is the prime beneficiary.”    From Ponzi Regulation


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